Energy Market Review, Monday 23rd July

Posted on 23rd July 2018

Headlines for Monday, 23rd July

The majority of gas and power contracts rose last week, reversing their recent downwards movements, as EU ETS carbon hit a fresh seven-year high, reaching €17.2/t on 20 July. Prices have been supported by higher power across Europe this summer amid ongoing heatwaves sweeping the continent. Nearly all seasonal gas and power contracts increased last week.

Day-ahead gas prices gained 2.1% to 58.3p/th. Prices lifted as gas demand for power generation rose as renewables output continued to remain relatively low, and rising temperatures increased demand for cooling. This was despite the gas system being oversupplied throughout last week. Seasonal gas contracts gained 1.1% on average, with winter 18 gas up 1.7% to 64.1p/th.

Day-ahead power was lowered by a slight increase in wind generation, falling 0.3% to £57.4/MWh. Seasonal power contracts went up 0.9% on average. Winter 20 power was the exception, remaining at £53.9/MWh.

Brent crude oil prices declined 0.4% week-on-week to $73.3/bl. Prices fell to $71.4/bl on 17 July, a three-month low, as concerns over supply disruptions eased and the market’s focus moved to increasing production caused by concerns of oversupply from Saudi Arabia. Official data released mid-week showed that US crude inventories increased the previous week as production hit 11.0mn bpd for the first time.

Brent Crude Oil

Brent crude oil curtailed 4.9% to average $72.7/bl, down from $76.4/bl the previous week. Oil prices started the week at $74.5/bl but fell to $71.4/bl on 17 July, a three-month low, as concerns over supply disruptions eased and the market’s focus moved to increasing production caused by concerns of oversupply from Saudi Arabia. A rise in US crude inventories also weighed on prices, as concerns grew about weak demand in the face of the ongoing US-China trade war. Official data released mid-week showed that US crude inventories increased the previous week as production hit 11.0mn bpd for the first time.

API 2 Coal

API 2 coal slipped 3.3% to average $89.0/t last week. Coal markets have remained relatively stable despite news of potential sanctions on US coal imports to the EU if US President Donald Trump imposes any further EU restrictions.

EU ETS Carbon

EU ETS carbon prices increased 2.2% to average €16.4/t last week, up from €16.1/t the previous week. EUA prices peaked intraday at €17.2/t on 20 July, a fresh seven-year high. Carbon prices have been supported by rising power demand across Europe as the power sector responds to increased cooling demand amid the ongoing heatwave. Hydropower reservoirs have also been negatively impacted as they run low, with depleted river levels reducing cooling water availability for nuclear power plants, increasing demand on coal fired generation.

NBP Gas

Near-term

Prices for all near-term gas contracts were higher last week. Day-ahead gas gained 2.1% to 58.3p/th, despite the gas system being oversupplied throughout last week, which pushed prices down to 56.8p/th on 17 July. Prices gained support from Norwegian outages on 18 July amid increased demand on the continent, rising to 58.5p/th on 19 July. Prices eased at the end of the week with the arrival of the Al Mayeda LNG tanker from Qatar to Milford Haven on 20 July. Month-ahead gas prices also increased 2.1%, rising to 58.0p/th, up 9.6% from the same period last month when it was at 55.0p/th.

Annual October 18

Annual October 18 went up 1.5% to 57.7p/th, reversing the previous week’s losses. The contract is 4.3% above its price the same time last month (55.4p/th) and 33.1% higher than the same time last year (43.4p/th).

Baseload Power

Near-term

Most near-term baseload power contracts rose last week. Day-ahead power was an exception, falling 0.3% week-on-week to £57.4/MWh on 20 July, down from £57.5/MWh the previous week. Low wind generation and a downturn in solar power output saw day-ahead power prices start last week at £59.4/MWh, but stronger renewables forecasts towards the end of the week weighed on prices. Month-ahead power grew 3.0% to £57.0/MWh, and September 18 power gained 2.2% to £59.0/MWh.

Seasonal

Most seasonal baseload power prices grew last week, up 0.9% on average. Winter 20 was the exception remaining unchanged at £53.9/MWh. Winter 18 increased 2.0% to £62.2/MWh. Summer and winter 19 gained 1.2% and 0.9% to £51.2/MWh and £57.1/MWh respectively.

Annual October 18

The annual October 18 power contract gained 1.6% to £56.7/MWh (up from £55.8/MWh), reversing the previous week’s losses. This is £2.3/MWh (4.3%) higher than the same period last month, and an increase of 34.3% from last year when it was £42.2/MWh.